In fact, not even matching the market is the aim. Long-term comfort (in retirement) and short-term comfort (being able to cope with whatever volatility their capital exhibits) is the aim.

It’s what makes things like the Permanent Portfolio such a good idea. Almost certainly lousy versus excess stocks over even the medium term, but probably great for most people’s needs, if set up cheaply.

What happens if it doesn’t work?

The consequences of of an investment strategy that doesn’t work is a financial setback. Then you have to make up for it, usually by saving more and/or saving for a longer period of time. Alternatively, it might mean cutting back goals or having to alter your plans.

When figuring out how much we have to save, for how long, and how much we’ll have to spend in the future, we already have to deal with the uncertainty of what the markets will do. Trying to beat the markets just adds another layer of uncertainty; whatever the market does, you now don’t know whether or when you’ll do better or worse or by how much.

In the grand scheme of things, sharing in the market’s performance less the cost of low cost index funds, should leave us well served (at the very least, serve us better than trying and failing to do best them). And, as far as making plans and setting savings goals, does it really make sense to plan to beat the markets and be the exception to the rule? (This may be the 5th question to ask.)

A strategy must make sense; if not, data means nothing. That said, having the data support you is a big plus. The benefit here is that data is objective while your own thought processes are subjective. You need to get outside yourself and looking at the historical record permits you to do that. And, yes, you need to think through whether the strategy is going to continue to work or is just some gimmicky thing that happens to backtest well for a time. That third test is a check on the validity of the first two.

Rob